Author(s): Aaisha Hira
Paper Details: Volume 3, Issue 3
Citation: IJLSSS 3(3) 55
Page No: 621 – 626
INTRODUCTION
A significant contribution to the evolution of India with regard to its policies on corporate financial stress was the Insolvency and Bankruptcy Code (IBC) of 2016. The IBC has been in a continual development over the years through enactments, regulatory enhancements and jurisprudential pronouncements. In 2024 and 2025, the Indian government amended the IBC to realize that further rationalisation of the insolvency procedure is needed, and additional issues should be considered. The reforms are projected to safeguard creditors, enhance efficiency of corporate insolvency administration and ensure that the system is aligned to best global practices. In this article, the authors analyze the latest IBC amendment and how it is likely going to impact the insolvency law in India, the creditors and business entities.
KEY PROVISIONS UNDER REVISED IBC (2025)
PROLONGATION OF PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS (PPIRP)
In 2021, Pre-Packaged Insolvency Resolution Process (PPIRP) was launched in India to enable finance resolution process of small businesses and firms in India called Micro, Small and Medium Enterprises (MSMEs). As it is now, through the introduction of the changes to the Insolvency and Bankruptcy Code (IBC) in 2025, the government has also extended this mechanism to bigger companies. This is in an effort to curb the process of insolvency since the usual method which is known as the Corporate Insolvency Resolution Process (CIRP) can be highly time consuming and expensive to implement. Having made PPIRP an option to the larger corporations, it is believed that the financially struggling enterprises will find it easier to hasten reorganization and come back on track without having to waste time in court. This is a significant amendment to Insolvency law in India because it will offer a quicker and more viable method to a financial distress.[1]
In the updated provisions, corporate debtors whose turnover and asset levels are above the levels stipulated by the government and which are of the required level, will now be allowed to initiate PPIRP. It can only be initiated following at least 66 per cent of the financial creditors in value properly approving the process and that creditor confidence must be the basis of the restructuring process. In contrast to the traditional CIRP where the control of the company is passed to a Resolution Professional (RP), PPIRP enables the company to be in the hands of the current management of the business throughout the process and thus, causing minimal great disorders in the running of the business.
STRENGTHENING THE RIGHTS OF SECURED CREDITORS
Among the most significant amendments the 2025era brought to the Insolvency and Bankruptcy Code (IBC) is giving greater powers to secured creditors. Banks or other financing companies normally act as secured creditors when they lend their funds to companies with an undertaking against security in the form of a land, property or other valuable items. During insolvency, these creditors normally get frustrated either because they are unduly delayed or because they do not know how they can get back their money. New amendments are meant to provide them greater power and clarity in such a scenario.
One of these advancements is that secured lenders can exercise more voting rights when it comes to the Committee of Creditors (CoC). This implies that they can dictate more when it comes to making a conclusion, whether to accept a resolution plan or not, whether to consider insolvency/ liquidation or not. This will allow them to have their interests guarded in the right manner. It is equally stated in the amendments that when liquidation occurs, secured creditors have two choices – either they forego their security to pool into the liquidation estate to share proceeds with other creditors or they can go ahead to enforce their security interest independently under the relevant legislation. Individuals who decide to pursue their own security will not be left behind in pursuing money even though they will go first. This eliminates confusion and makes secured creditors feel more secure that their rights would be honored.[2]
CREDITOR PROTECTION AND PRIORITIZATION OF PAYMENTS
Under the IBC, even in case of insolvency or liquidation, there is a priority order of payments that will occur when a company goes through such a process and this is referred to as the “waterfall mechanism. What this implies is that some creditors are paid before others since the degree of risk they took, as well as the type of claim they have will determine how they are to be paid. The proposed changes warrant that the secured creditors, who may be banks or other financial institutions holding security over their dues, are not deprived of their special position to get their dues recovered. Next come workmen dues, employee salaries and government due, suppliers and service providers which would be operation creditors also have a reasonable safeguard under the new system.
The 2025 amendments have increased the transparency and predictability in this payment structure, eliminating legal wrangles on the recipients of the foreign resources. Liquidation proceeds are also carried out lawfully and strictly by the priority list by the law and no one can misuse it or have an unfair advantage over a certain group of people.[3]
EXPANDED RESPONSIBILITY OF RESOLUTION PROFESSIONALS (RP)
The role of Resolution Professionals (RPs) can be very significant with regard to the procedure of corporate insolvency. They deal with the administration of a company during insolvency, such that the process is deemed fair, transparent, and based on the law. There were however increasingly more concerns that not all the RPs were undertaking their roles and duties in a satisfactory manner or would have conflicts of interest. To counter that, the IBC has come up with stricter regulations to ensure that RPs are more accountable and responsible to their actions in the amendments that became enforceable in 2025: –
1. Each RP should be registered with Insolvency and Bankruptcy Board of India (IBBI) and should have well defined qualification criteria.
2. Before assigning a case of insolvency, they must state the conflict of interest to ensure that they are not biased and independent in the process.
3. In case negligence, carelessness or any other misconduct by an RP is observed, that person is subject to serious disciplinary action that may comprise penalties, suspension, or cancellation of registration.
Such changes make sure that the task of managing insolvency cases is left to qualified, experienced, and honest professionals only. This not only safeguarding the interest of creditors and other parties, but also enhances confidence in the entire insolvency system. Through these reforms, the government seeks to ensure that insolvency process becomes more professional, reliable and efficient.[4]
PUBLICATION OF ALL SCHEMES IN FRONT OF THE COMMITTEE OF CREDITORS (COC)
One of the major transformations that became effective under the 2025 amendments of the Insolvency and Bankruptcy Code (IBC) is linked with enhancing the transparency and fairness of the process of corporate insolvency resolution. Resolution Professionals (RPs) are as of now directed to file before the Committee of Creditors (CoC) all the resolution plans that they receive even when some of the plans are not fully applicable to the fact of the law.
It was observed in the preceding section that RPs would not just filter plans in that the plans to be filtered may be done by the RPs themselves and hence the CoC will be oblivious of other possible plans. As a result, there were suspicions of the absence of transparency and suspicions that indeed best plan was being considered. To prevent this, changes were done: –
1. Regulation 39(2) is amended so that all the resolution plans forwarded to the RP can be either fully compliant or not and shall be shared with the CoC.
2. The RP would also need to attach adequate details along with each plan, i.e., whether the plan addresses the eligibility criteria, whether there exists a legal deficiency in the scheme, or other material facts that impacts the decision-making process.
This will help the CoC representing the financial creditors and considered as a crucial entity in the insolvency process would be equipped with adequate information. Coc members are able to make a better decision by putting all available options before them and making it more just. Even plans that are not compliant may provide ideas or point some dimensions that it can be integrated into other plans or serve in negotiations.[5]
CONCLUSION
The amendments to Insolvency and Bankruptcy Code (IBC) in 2025 will represent a huge stride forward to ensuring the Indian insolvency process is expedited, fair, and transparent. The government has attempted to eliminate delays and uncertainty in the process by introducing some of the following measures: extending the Pre-Packaged Insolvency Resolution Process (PPIRP) to large firms, enhancing the rights of secured creditors, safeguarding the interest of dissenting creditors and holding the resolution professionals in greater accountability. It is believed that these changes will increase confidence on behalf of the creditors, promote pre-insolvency resolution of financial tensions, and enable the failing companies to come back without excessively long lawsuits. Upon effective implementation of these provisions, not only will the insolvency framework of India be made stronger but also the business climate will be more stable and more favorable to the investors.
REFERENCES
- Critical Analysis of Pre-Packaged Insolvency Resolution Process Under IBC available at https://ibclaw.in/critical-analysis-of-pre-packaged-insolvency-resolution-process-under-ibc-by-kanishka-agrawal-and-saurav-singh/ (last visited on 25th June 2025)
- IBBI Tightens Insolvency Rules: Key Changes to Strengthen Creditor Rights and Transparency available at https://www.scconline.com/blog/post/2025/05/30/ibbi-insolvency-reforms-legal-news/ last visited on 26th June 2025)
- Revamping Corporate Insolvency: IBBI’s Fourth Amendment Regulations, 2025 available at https://www.foxmandal.in/News/revamping-corporate-insolvency-ibbis-fourth-amendment-regulations-2025 (last visited on 27th June 2025)
[1]. Critical Analysis of Pre-Packaged Insolvency Resolution Process Under IBC available at https://ibclaw.in/critical-analysis-of-pre-packaged-insolvency-resolution-process-under-ibc-by-kanishka-agrawal-and-saurav-singh/ (last visited on 25th June 2025)
[2] IBBI Tightens Insolvency Rules: Key Changes to Strengthen Creditor Rights and Transparency available at https://www.scconline.com/blog/post/2025/05/30/ibbi-insolvency-reforms-legal-news/ last visited on 26th June 2025)
[3] Revamping Corporate Insolvency: IBBI’s Fourth Amendment Regulations, 2025 available at https://www.foxmandal.in/News/revamping-corporate-insolvency-ibbis-fourth-amendment-regulations-2025 (last visited on 27th June 2025)
[4] Supra note 3
[5] Supra note 3